2013 Employer Health Benefits Survey

Section Nine: Prescription Drug Benefits

Almost all covered workers have coverage for prescription drugs. More than three in four covered workers are in plans with three or more cost-sharing tiers for prescription drugs. Copayments, rather than coinsurance, continue to be the preferred form of cost sharing in most drug tiers.

As in prior years, nearly all (98%) covered workers in employer-sponsored plans have a prescription drug benefit.

Three-or-More Drug Cost-Sharing Tiers

A large majority of covered workers (92%) in 2013 have a tiered cost-sharing formula for prescription drugs (Exhibit 9.1). Cost-sharing tiers generally refer to a health plan placing a drug on a formulary or preferred drug list, which classifies drugs as generic, preferred, or non-preferred. Over the past years, an increasing number of plans have created a fourth or even higher tier of drug cost sharing, which may be used for lifestyle drugs or expensive biologics. Employers often place various drugs in generic, preferred, or non-preferred tiers to encourage enrollees to select cheaper alternatives or to pass on to enrollees the higher costs of more expensive drugs.

Eighty-one percent of covered workers are enrolled in plans with three, four, or more tiers of cost sharing for prescription drugs, similar to 77% of covered workers in 2012 (Exhibit 9.1). The percentage of covered workers enrolled in a plan with four or more tiers for prescription drugs has increased from 14% in 2012 to 23% in 2013.

HDHP/SOs have different cost-sharing patterns for prescription drugs than other plan types. Only 45% of covered workers in HDHP/SOs are in a plan with three or more tiers of cost sharing for prescription drugs; 12% are in plans that pay 100% of prescription costs once the plan deductible is met (Exhibit 9.2).

Twenty-three percent of covered workers are in a plan that has four or more tiers of cost sharing for prescription drugs (Exhibit 9.1). Among workers covered by plans with three or more tiers of cost sharing for prescription drugs, copayments are far more common than coinsurance in the first three tiers (Exhibit 9.3). For covered workers in plans with three or more cost-sharing tiers, 39% face a copayment for fourth-tier drugs and 48% face coinsurance (Exhibit 9.3).

For covered workers in plans with three, four, or more tiers of cost sharing for prescription drugs, the average drug copayments for first-tier drugs ($10), second-tier drugs ($29), third-tier drugs ($52), and fourth-tier ($80) are comparable to the amounts reported in 2012 ($10, $29, $51, and $79, respectively) (Exhibit 9.4).

For covered workers in plans with three, four, or more tiers of cost sharing for prescription drugs who face coinsurance rather than copayments, coinsurance levels average 16% for first-tier drugs, 25% for second-tier drugs, 38% for third-tier drugs, and 32% for fourth-tier drugs. All of the estimates are similar to last year except for the average coinsurance for first-tier drugs (16%) which is statistically different from 2012 (20%) (Exhibit 9.4).

Two Drug Cost-Sharing Tiers

Ten percent of covered workers are in a plan that has two tiers for prescription drug cost sharing (Exhibit 9.1). Similar to workers in plans with more cost-sharing tiers, copayments are more common than coinsurance for workers in plans with two tiers (Exhibit 9.5). The average copayment for the first tier is $11, and the average copayment for the second tier is $31. The average coinsurance rate for the second tier is 30% (Exhibit 9.6).

Single Drug Cost-Sharing Tiers

Five percent of covered workers are covered by plans in which cost sharing is the same regardless of the type of drug chosen (Exhibit 9.1). Among these covered workers, 19% have copayments and 81% have coinsurance (Exhibit 9.7).

For those workers with the same cost sharing regardless of the type of drug, the average copayment is $12 and the average coinsurance is 22% (Exhibit 9.8).

Coinsurance rates for prescription drugs often have maximum or minimum dollar amounts associated with the coinsurance rate. Twenty-three percent of workers with a coinsurance rate have a maximum dollar amount attached to the coinsurance rate, 6% have a minimum, and 17% have both for first-tier drugs (Exhibit 9.9).

Generic drugs: Drugs product that are no longer covered by patent protection and thus may be produced and/or distributed by multiple drug companies.

Preferred drugs: Drugs included on a formulary or preferred drug list; for example, a brand-name drug without a generic substitute.

Nonpreferred drugs: Drugs not included on a formulary or preferred drug list; for example, a brand-name drug with a generic substitute.

Fourth-tier drugs: New types of cost-sharing arrangements that typically build additional layers of higher copayments or coinsurance for specifically identified types of drugs, such as lifestyle drugs or biologics.

Brand-name drugs: Generally, a drug product that is covered by a patent and is thus manufactured and sold exclusively by one firm. Cross-licensing occasionally occurs, allowing an additional firm to market the drug. After the patent expires, multiple firms can produce the drug product, but the brand name or trademark remains with the original manufacturer’s product.